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Hey, FCC Chairman Genachowski! “Can you hear me now?” Somehow, AT&T never figures it out and keeps burning regulatory bridges. First they ignored the facts of how monopolistic their proposed merger with T Mobile really and truly was. When you are going to control up to 72% of the traffic in certain markets, you must be fooling yourself or very naïve that such a merger would fly past the regulators. Not surprisingly, the merger went down in flames. A key argument for the deal was that both companies were short of spectrum and somehow this combination would magically produce it. That denied the reality that neither T-Mobile nor T had any excess capacity longer term to redeploy had they been allowed to merge. That deal was never going to solve its bandwidth problems. A deal with Clearwire, could.

Next AT&T also claimed that the merger was going to retain jobs, if not create them. Just ask Mitt Romney, who loves to fire people, about all the synergies you usually create when you put two companies together. The whole point of most mergers is to consolidate and reduce labor and other redundant costs. You never need two CEO’s or two CFO’s or two call centers where one will do. AT&T spoke, instead, about all the jobs they would bring back to the U.S. and/or keep in the call centers they had here. The Regulators didn’t find that argument credible. We unraveled why the unions were in favor of that nonsensical aspect in a previous article. It turned out the unions were going to gain lots of new members at T Mobile where they had never successfully organized the workforce. In recent days, T-Mo announced hundreds of call center layoffs so T, shortsightedly, took that as an opportunity to mouth off.

One surely wonders, If T was so worried about not having enough spectrum, then why did it craft a break up fee such that T-Mobile received spectrum worth $1 billion plus $3billion in cash? Why on earth would you give any spectrum away? Deutsche Telekom really wanted out of the U.S. market and negotiated a fabulous package for itself. Now, $4 billion richer than it was before all this started, T-Mobile needs to get its house in order and streamline itself while it figures out its next move.

I continue to believe that the most logical outcome that the FCC would like to see is three viable competitors of equal or similar size. Even if they have said they would like four competitors, in a world in which networks have become so hugely expensive, that is just not realistic. But, three competitors is viable and would really be good for consumers. A T-Mobile merger with Sprint would result in three competitors, each with about 30% of the market.

The problem is that the wealth destruction at Sprint has been something to behold under current management. Last year, in the course of trying to trash its spectrum rich stepchild Clearwire, Sprint destroyed its own stock price as well. In it’s very bizarre multi-year deal to join the iPhone club, it has committed to paying Apple an obscene amount of money even as it receives the latest iPhones on a timeline well behind its competitors. Apple is working first to supply T and VZ with 4G phones before it gets around to making phones that will work on the Sprint spectrum frequencies.

Somehow in recent weeks, analysts have become more positive about Clearwire and less positive about Sprint’s long term viability. Surely DT is reading the same reports. Were there to be a TMO/S merger, who would be the buyer and who the seller? With Sprint selling in the 2’s, its options are limited. Its debt is probably daunting to Deutsche Telekom.

Spectrum is the key going forward and it is Clearwire which holds spectrum in profusion. Clearwire CFO Hope Cochran was in NY recently to meet with shareholders. One of her key pronouncements was that Clearwire has seen a 700% increase in network usage in 2012 due to smart phones, mostly on the Sprint network. Give them bandwidth and they will come seems to be the message. Clearwire’s very wide data network is finally in the right place at the right time in terms of doing deals. Spectrum is rising in value almost monthly now. CLWR’s network will be even more enhanced when it is upgraded to LTE/TDD starting late this year and into the first half of 2013. For data and streaming video, more cell sites closer together provides better service. For voice, lower frequencies with better propagation and fewer cell sites is better.

It’s now confirmed that CLWR is talking with many prospects about leasing capacity on its wholesale network or buying some of its excess spectrum. The message is the talks may take forever. Nobody knows when the FCC will actually get around to holding new auctions to recycle some frequency but we do know that whatever spectrum they will auction off in the future will need to be cleared of prior usage and that will take years at best and many years at worst. For sure, no matter how much spectrum the big guys have, it isn’t enough. There is, however, the psychological problem for a giant like T or VZ of not owning the spectrum they are using. “It’s not in their DNA.” Clearwire has been able to cut costs, hang on until it got past its debt payment date of December 1, raise debt and equity since then and now is starting to see its stock lifting. It can negotiate with more breathing room and hold out for somewhat better prices. In the end, spectrum is king and CLWR has far more than it needs.

Clearwire’s financial picture for this year is pretty well known. Revenue recognition from Sprint will be on a straight line basis through the four quarters even though more cash will come in 2012. That means the most important news will come on the deal front with new customers or spectrum sales, or both. That might even mean rolling together all of that delicious spectrum into a combined Sprint, T Mobile and Clearwire. Meanwhile, AT&T is spitting into the wind for unknown reasons. One can’t think it is winning friends in D.C. where it needs all the help it can get to solve its bandwidth problems.